Writer: Lois

A man wears a virtual reality headset. Photo: Getty Images

Meta Platforms, Inc., formerly known as Facebook, Inc., shares have fallen by 22.6 per cent to 249.90 USD in after-hours trading after the company revealed higher costs with a weak revenue forecast late Wednesday.

The plunge caused the company’s valuation to fall by almost 200 billion USD.

Meta Platforms, Inc., well known for its metaverse project, currently receives almost all of its income as advertising revenue.

According to World Bank data, Meta Platforms’ overall value, or market capitalisation, will decrease on a scale equal to the whole Greek economy if the drop continues until the market opens on Thursday.

Meta CEO Mark Zuckerberg has described the metaverse as a virtual environment where users can immerse themselves in different worlds using various devices like virtual reality headsets and augmented reality glasses instead of screens.

The project cost is enormous, with the company investing over 10 billion USD in its Reality Labs research in 2021, which involves developing technologies like virtual reality headsets and augmented reality devices. The investment contributed to the quarter’s profit decline but increased the company’s employee numbers 23 per cent.

Meta reported that it expects revenue in the current quarter to be between 27 billion USD and 29 billion USD, which is below the market expectations of 30.2 billion USD. The California-based company says this shortcoming is partly because of competition from TikTok and other rival digital platforms.

According to Meta Chief Operating Officer Sheryl Sandberg in a conference call with analysts, global supply chain issues, early holiday spending by advertisers, and workforce shortages also negatively affected the company’s advertising sales.

Apple Inc.’s recent privacy changes have also affected Meta’s advertising revenue, as the update has hindered the abilities of companies like Meta to track users for commercial purposes.

“It is time for a reality check on Meta’s position for the metaverse,” stated Raj Shah, an analyst from American digital consulting company Publicis Sapient

“The metaverse is a long way from being profitable or filling the gap in ad revenue after Apple’s policy change.”

“There’s a lot of uncertainty about Meta’s investments in the metaverse and if or when they will have a positive impact on the company’s bottom line,” noted Debra Aho Williamson, an analyst at Insider Intelligence.

“While we expect Meta to ramp up testing ads and commerce within its metaverse offerings this year, those efforts will be highly experimental and not likely to drive much revenue in the near term.”

Meta says it earned 10.29 billion USD, or 3.67 USD per share, in the last three months of 2021, which is 8 per cent less than its earnings of 11.22 billion USD, or 3.88 USD per share, in the final three months of 2020.

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Posted by: Vontheway (V在途中)